Former financial advisor and current investing influencer Humphrey Yang is known for taking complex concepts and making them easy to understand. In a recent YouTube video, the money guru gave tips on “How To Be a Millionaire on a Low Salary.”
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Here are his 4 pillars of personal finance that can help you become a millionaire without a large income.
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Frugality
The first pillar of personal finance is frugality, according to Yang. He explained that frugality is not to be confused with being cheap. Instead, he urged hopeful millionaires to think of it as “ensuring every dollar has a place.”
Yang noted that since every dollar matters, he is always trying to get the best deal possible, saving where he can by using rewards apps at fast food restaurants. Furthermore, he encouraged those watching to “focus on how much you save, rather than how much you make.” In other words, a high income does not equate to wealth, since you could be spending a large portion of your money and only investing a small amount.
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Invest
Yang’s second pillar of personal finance is investing. The personal finance influencer recommended investing aggressively. He cautioned, however, that this does not necessarily mean investing in aggressive holdings with high risks and returns. Instead, he said you should be “contributing to your investments as early as possible and as much as possible.”
While the idea of investing may seem overwhelming or intimidating at first, there are numerous resources available to help even the youngest aspiring millionaire get started. The Financial Industry Regulatory Authority (FINRA) recommends setting investment goals first, and then determining your investment timeline or when you will need your money. Working with a professional is strongly encouraged to ensure that you make sound investment decisions.
Time
The third pillar is time. The earlier you start, the better off you will be once you retire. It is important to note that significant gains come at the end for compound interest. More wealth is created later in life if you begin investing early. Yang pointed to famed investor Warren Buffet, who has amassed a net worth of $158 billion. According to Forbes, the 94-year-old bought his first stock at 11 years old and was filing taxes by 13.
Yang credits Buffet’s massive wealth to “persistence, consistency, and living to 95,” and noted that he made “99% of his net worth after his 60th birthday.” He explained that compounding interest allowed Buffet to take the $3 billion he was worth at the age of 60 to the nearly $160 billion he has now.
Income Streams
The final pillar to becoming a millionaire on a low income is income streams. Yang sais that the majority of millionaires have multiple income streams. Having multiple sources of income can help to build wealth. He mentioned five different sources of income that most people have: earned income (your primary job), investment income, interest income, rental income and side hustle or second job income. Yang noted that while he does believe you can become a millionaire on a low income, it won’t necessarily be easy.
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This article originally appeared on GOBankingRates.com: How To Become a Self-Made Millionaire on a Low Salary, According To Humphrey Yang
